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This is why not all stablecoins will crash, according to Tether CTO Paolo Ardoino

Kitco News

(Kitco News) - Tether (USDT) is safe, backed by U.S. dollars, and has plenty of use cases, said Paolo Ardoino, CTO of Tether Limited. The company's new product, Tether Gold, is a gold-backed cryptocurrency that Ardoino remarked may become a "reserve currency."

Tether (USDT) is the largest stablecoin by market capitalization, and is interchangeable with US dollars.

"If a customer wants to get Tethers, so Tether tokens pegged to the US dollar, they have to send a wire to Tether limited," he explained. "So let's say the wire is $100,000. They will get back 100,000 Tethers. Simple as that."

Ardoino spoke with David Lin, Anchor and Producer at Kitco News.

Is Tether safe?

The stablecoin UST recently suffered a short attack. This caused almost $45 billion to be wiped off its market capitalization, as well as that of its associated crypto LUNA. Yet Ardoino does not foresee such a fate befalling Tether.

Unlike Tether, UST is algorithmic, and its peg to the US dollar is linked to another crypto, LUNA. Tether, on the other hand, has actual USD assets to draw from.

"[UST is] an algorithmic stable coin," he explained. "That is completely different from Tether… [UST's] backing was not in Treasury Bills, was not in cash, was not in dollars. It was in LUNA… [Tether's] portfolio of assets has US Treasuries, cash, bank deposits, and the famous commercial papers."

Ardoino addressed whether Tether Limited has sufficient reserves to back its tokens.

"This information is publicly available on our transparency page," he said. "It is subject to attestation made by a third party, and also is provided on a quarterly basis to the New York Attorney General."


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Tether Gold

Tether Gold (XAUt) is Tether Limited's cryptocurrency that is backed by gold reserves in Switzerland. Ardoino sees Tether Gold's potential as consumers seek a stable store of value.

"Gold, like Bitcoin, is limited in supply," he said. "… The majority of gold has already been extracted. And also extracting gold, like mining Bitcoin, is extremely expensive… That's why gold has been used for the last five to seven thousand years as a currency… Having a way to actually transact gold, and using it in smart contract and using it as a reserve currency in the crypto industry and financial industry is really important."

Tether Gold is backed by gold bars held in Swiss vaults.

"You can redeem Tether gold for actual gold bars," he said. "… So, we had a few occasions of physical redemptions… We ship the gold bar only in Switzerland, because the cost of protection security is really high. Then from Switzerland to anywhere else, the customer has to organize their own delivery."

To find out Ardoino's thoughts on Central Bank Digital Currencies (CBDCs), Bitcoin, and the LUNA-UST short attack, watch the above video.

Follow David Lin on Twitter: @davidlin_TV

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